The example was designed to show option value. Arguably a better...

The example was designed to show option value. Arguably a better example might be today - LITCF can be converted to LIT by paying the 4.99c. LIT currently trades at 13c and LITCF should be at least 8c (technically 8.01c but I'll ignore the 0.01c) based on this. For the exercise I will ignore any option premium - which should demonstrate why you should put some premium on this option value.

Say you wanted exposure to LIT.

100,000 shares in LIT would cost $13,000
or
100,000 shares in LITCF for $8,000

Let's assume LIT goes to 20c - well you'll make the same out of LITCF as you did LIT (i.e. $7,000) despite investing 62.5% more in LIT.
If they drop to say 7c LITCF should be at 2c you'll loose $6,000 on both.
If it goes to zero, you loose $13,000 on LIT and $8,000 on LITCF

But bizarrely you can buy LITCF for 6.4c when the LIT share price is 13c - ultimately the market is ascribing a negative option value. Mispricing like these should not exist in an efficient market... which is the opportunity.